Israel-Hamas conflict is ‘new cloud’ darkening economic outlook – IMF chief

Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, addresses the media on the fourth day of the annual meeting of the IMF and the World Bank, following last month’s deadly earthquake, in Marrakech, Morocco, Oct 12, 2023. REUTERS/Susana Vera

MARRAKECH, Morocco  -International Monetary Fund managing director Kristalina Georgieva said on Thursday the “heartbreaking” Israel-Hamas conflict threatened to darken an already murky global economic outlook.

“We are closely monitoring how the situation evolves, how it is affecting, especially oil markets,” Georgieva said. There had been some fluctuations in oil prices and reactions in markets but it was too early to predict the economic impact, she added.

“Very clearly, this is a new cloud on not the safest horizon for the world economy, a new cloud darkening this horizon,” she told a news conference at the annual meetings of the IMF and World Bank in Marrakech, Morocco.

Georgieva joined a growing chorus of financial leaders expressing concern about the sudden eruption of violence in the long-running Israeli-Palestinian conflict which has already claimed more than 2,500 lives.

READ: World Bank chief says Gaza conflict is economic shock ‘we don’t need’

Israel has vowed to annihilate the Hamas movement that rules the Gaza Strip in retribution for the deadliest attack on Jewish civilians since the Holocaust, when hundreds of gunmen poured across the barrier fence and rampaged through Israeli towns on Saturday.

Severe shocks becoming ‘new normal’

Israel said on Thursday there would be no humanitarian break to its siege of the Gaza Strip until all hostages taken by Hamas were freed, after the Red Cross pleaded for fuel to be allowed in to prevent overwhelmed hospitals from “turning into morgues”.

“It’s heartbreaking to see innocent civilians dying,” an emotional Georgieva told reporters. “Who pays the price? It is the innocent who pay the price.”

Georgieva said severe shocks were becoming “the new normal” in a global economy characterized by weak growth, economic fragmentation and deepening divergences, with interest rates expected to stay higher for longer to tame persistent inflation.

She appealed to countries to avoid escalating the situation and focus on areas of cooperation. “We do need to build our agility in terms of anticipating shocks and being quick to respond,” she said.

French Finance Minister Bruno Le Maire told reporters any regional expansion of the conflict would lead to “problematic economic consequences” for energy prices and global growth.